The inefficient 'housing element' is better than nothing when it comes to creating affordable housing

By Carol Lloyd, Special to SF Gate

Published 4:00 am, Friday, June 30, 2006

As the Bay Area real estate market softens, no doubt we'll begin to hear tales of latte-swilling DINTs (double-income tenants) scanning the Open Homes sections with eyes gleaming in anticipation of a buyer's market that they can finally jump into. But before you breathe a sigh of relief and begin talking about "sanity being restored to the market," know that the state of surreal estate is still the law of the land.

And I mean that in the worst possible way.

Rents are soaring beyond the reach of many folk's incomes. According to a 2005 report from the National Low Income Housing Coalition, a minimum-wage earner must work 131 hours per week, 52 weeks per year to afford the rent on a two-bedroom apartment. (In case you're not in the mood for math, that means 17-hour workdays, seven days a week.)

The cost of homeownership is equally egregious. "We have the second-worst affordability rate in the nation," explained Janet Huston, director of communications for California's Department of Housing and Community Development, referring to the fact that only 11 percent of the state's residents can afford homes. "It's not going to improve." Of course, our beloved Bay Area boasts some of the least-affordable housing in the state.

So despite the good news that the real estate market is softening, the bad news is that there's an underlying issue that's going to make housing unaffordable for years to come: California isn't building enough to meet the demand.

"Our department estimates that in order to keep up with population and job growth, there needs to be 220,000 new housing units constructed every year, and that hasn't happened since 1989," Huston told me. "Depending on who you speak to, we have a housing deficit of 1 to 2 million units. And every year we don't meet our demand, it increases."

That's a lot of unbuilt bathrooms, bedrooms and kitchens. Generally, those unmet demands fall into the categories of housing that few developers will touch: low-income and moderate-income housing. Since condo conversions and condo developments have become the ticket to quick cash, fewer developers are interested in creating rental housing -- the only kind of housing most low-income earners can afford.

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So what is being done about this? To broach this question, one must take a crash course in the bureaucratic alchemy known as "the housing element." In its simplest terms, it's a housing plan that each city must create and have certified by the state.

Although each local government in California has power over its own land use, the state government realizes that it's in the state's economic interest to provide "safe and affordable housing." So every five years, California decides how many units of housing -- serving various income groups -- need be built to accommodate our growing population. State and regional government groups -- in our case, ABAG (Association of Bay Area Governments) -- then hash out where that housing needs to be built, based on job growth, infrastructure, public transit and other factors.

Then ABAG and similar groups allocate housing to each of their municipalities and unincorporated areas, and the hashing-out continues. Typically, cities -- especially those with established populations that may object to changing "neighborhood character" and giving up remaining open land -- want to claim that they don't need as much housing as the state says they do. In the Bay Area, where NIMBYism has both a noble history of fighting nefarious development and a nefarious history of fighting noble development, most cities are eager to argue their allotment down.

Finally, ABAG gives each local government a magic number, and each planning department must come up with a proposal to plan for that number of units in specified income categories. That plan, the city's housing element, might involve rezoning industrial areas as residential, finding unbuilt urban lots, selling unused governmental land and upzoning lower-density residential areas. When finished, it's submitted to the state for certification. State certification makes the local government "in compliance" and gives it access to certain state housing funds and shields it from lawsuits from developers.

The problem is that reality is rockier than the smooth, euphemistically polished ideas found in government-authored housing policy. Every year, the hashing-out of numbers and the creation of plans to be certified takes years.

Earlier this year, for instance, Fremont's 1999 housing element was finally certified by the state. It wasn't as if the planning department was resting on its laurels and eating organic bonbons the past few years. It was dealing with the problem of finding land to use that the citizenry didn't object to. During this period, voters passed an initiative to downzone housing in the Fremont Hills to one unit per 20 acres. Environmental groups are protesting the possibility of building on other plots of open land near Coyote Hills and Patterson Ranch. In the meantime, the city was sued by an affordable-housing coalition, which claimed that Fremont wasn't doing enough to meet its low-income housing needs.

"It was very difficult finding land," said Jeff Schwob, director of planning for Fremont. "We don't have a lot of older neighborhoods which could be redeveloped. We rezoned much of our commercial and industrial land, but our industrial land is the engine of the city."

Fremont managed by doing a little of everything: allowing for higher density, legalizing second units in single-family neighborhoods, rezoning commercial and industrial land, and rezoning school and other government properties as residential. But it's a problem that's not going away. When the next year's housing element comes up, there will be even less available land -- and so on into the future.

In a sense, suburban cities like Fremont, with its fields of single-family homes, are now being asked to increase their density and share the burden of the region's growing population. Rural areas have other problems -- who wants to ask a small town to destroy its farmland for housing? Cities like San Francisco are already dense -- the very embodiment of the public transit-oriented housing the state is trying to encourage. Once areas like Hunters Point and Mission Bay are fully developed, city planners will be hard pressed to find more room for housing.

Once we have done this incremental upzoning, we either start creating high-rise downtowns in the burbs or establish more new, sprawling suburbs like American Canyon and Mountain House. Either idea is sure to enrage people.

The real issue, of course, is that cities don't actually build housing -- developers do. That means cities need to incentivize builders to fulfill their plans, which is easier said than done when it comes to low-income housing. "In the end, there's not that much money for low-income housing," Schwob explained. "We can make land available, but building affordable housing is very expensive."

But I know one planner-turned-developer who still feels cities could take their legal obligation to the housing element more seriously. He regards many of the government promises about new housing as so much hot air. "It's all BS," he told me, adding that recently a San Francisco city planner told him the city is meeting only 40 percent of its current needs. "Hardly any of the cities actually fulfill their plan."

No one disputes this fact. But as advocates of the housing element will tell you, the cities that succeed in creating a housing plan are far more successful at creating low-income housing than those that don't try at all. (As of last week, over 20 percent of California cities still did not have their plans certified.)

In a sense, to fully embrace the idea of the housing element is to enter the world of governmental magical thinking. It's all about the vision and the incentives and opening the door to possibility. It's a little like repeating a mantra to keep yourself feeling positive. It's kind of bogus, it's far from foolproof -- especially since we only have so much control over what happens to us. But it's also better than throwing up your hands and leaving it all to chance. This story has been changed since its original posting. - Ed

Carol Lloyd is currently at work on a book about Bay Area real estate. She teaches a class on buying your first home in the Bay Area, and another class based on her best-selling career counseling book for creative people, "Creating a Life Worth Living." For more information, email her at surreal@sfgate.com.